The Stimulus Package

Today may be the day that the American Recovery and Reinvestment Act of 2009 (aka the Stimulus Package) is passed; the Senate is voting on it right now. It is anticipated that it will be on President Obama’s desk to sign into law this weekend. While we don’t have all of the information about this Act, here are some highlights:

Contains a record-setting $10.472 billion in funding for the USDA Guaranteed Rural Housing Program to insure Rural Housing mortgages. These funds are in addition to funds the program has already received through the Continuing Resolution, as well as additional funding expected from Fiscal Year 2009 Appropriations legislation or further Continuing Resolution legislation. Again: WE HAVE NEVER STOPPED CLOSING AND FUNDING USDA RURAL HOUSING LOANS AND WILL CONTINUE TO DO THEM EVEN WHILE OTHER LOCAL LENDERS HAVE STOPPED AND ARE TELLING YOU THEY ARE OUT OF MONEY! There was a rumor that the USDA guarantee fee was going up as part of the Stimulus Package; it will remain unchanged at 2.0% for purchase transactions. There was a tax credit increase requested by the Senate; it has since been scaled down to $8,000 (or 10% of the value of the home, which ever is lower) from $15,000, which is still $500 above where it currently is. This is for any first time homebuyers who purchase homes from the start of this year until the end of November. It starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit IF they sell their homes within three years.

 More details will be provided to you concerning the impact of the Stimulus Plan once we go through the final version that is signed into law. Until that time, none of these are in effect yet.

Fannie Mae LOOSENED a Guideline – A Step in the Right Direction!

Over the last 18 months, since August, 2007, mortgage guidelines have been tightening due to the conditions of the industry.  It seemed that every day since then we have gotten updates from Fannie Mae, HUD, Freddie Mac and our individual investors that made mortgage lending a little tougher, albeit still possible and not as hard as the news media states.

However, on Friday, I received an email from a fellow mortgage lender in the Tampa area with an attachment from Fannie Mae.  A while back, both Fannie and Freddie tightened up lending for buyers of 2nd homes and investment properties to the point that they could not purchase additional properties if they already had four (4) mortgaged properties, including their primary home.

I have been interviewed by newspapers and Good Morning, America and my focus has always been the same: they should allow those people who have good credit, sufficient down payment, good and deep credit, and reserves after closing and who have debt to income ratios of 45% or less to buy additional properties.  This would help the market because these are the people who would love to scoop up some of the great deals that are available in the real estate market these days.  It appears that Fannie Mae listened!

The new Fannie Mae guideline, that goes into effect for mortgages purchased after March 1, 2009, allows buyers to have 5 to 10 financed properties if they meet strict conditions.  They have to have 25% down for a 2nd home and 30% down for an investment property.  There are reserve requirements dependent on the type of property they are purchasing.  There are debt to income restrictions, as well as a requirement for allowing rental income only under certain conditions.  But the fact remains: this is the first LOOSENING of guidelines that we have seen in a LONnnnnnnnnnnnggggggg time and it could point to better times ahead!

While Fannie Mae is loosening, I have checked with all of our investors and, so far, none of them are following suit.  Some had said that since Freddie Mac hasn’t loosened their guidelines that they are not going to loosen theirs.  I would like to think that Freddie will follow suit soon and that the investors will then allow us to offer mortgages for buyers of 2nd homes and investment properties with more than 4 financed properties.  We just have to wait and see but I truly believe that this is a good sign for the mortgage industry and the real estate industry!